What is a nidhi company

Nidhi Company, is the one of non banking Indian Finance sector and recognized under section 620A of the Companies Act, 1956. Their main business is borrowing and lending money only between their members. The companies doing Nidhi business, viz. borrowing from members and lending to members only, are known under different names such as Nidhi, Permanent Fund, Benefit Funds, Mutual Benefit Funds and Mutual Benefit Companies.

You can do financial business like collecting deposits from members in form of fixed deposit, recurring deposit, open savings accounts of members and distribute loans to members(personal, properly, mortgage, jewellery, gold, vehicle etc.) Nidhis are more popular in South India and are highly localized single office institutions.They are mutual benefit societies, because their dealings are restricted only to the members; and membership is limited to individuals. The principal source of funds is contribution from the members. A nidhi company is supposed to carry out all its schemes and plans as per the guidelines of RBI. It cannot carry out any plan either loan or deposit of more than five years. The loans are given to the members at relatively reasonable rates for purposes such as house construction or repairs and are generally secured. The deposits mobilized by Nidhis are not much when compared to the organized banking sector. Nidhi in the Indian context means "treasure". However, in the Indian sector, it refers to any mutual benefit society notified by the Central Government as a Nidhi Company. They are created mainly for promoting the habit of thrift and savings amongst its members.

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